Telefonica is talking to banks about a flotation of O2 in the UK, after a sale to CK Hutchison was blocked by EU regulators in May.

According to the Financial Times, the Spanish company favours a London listing and retaining a reduced stake in the business.

However, no final decision has been made and Telefonica is still talking to private equity groups interested in buying O2 in the UK, in what appears to be a dual track process.

Either way, raising funds from the UK business is an important part of Telefonica’s debt reduction strategy.

A flotation is thought to be favoured by Telefonica UK CEO Ronan Dunne, who is overseeing the process for the Spanish company. Post-IPO, Dunne could stay in his post (he was set to leave if the sale to Hutch had gone ahead).

Telefonica pushed to be free of an exclusivity agreement with Hutchison, which became redundant once the EC had blocked a sale. That agreement now appears to have lapsed, leaving Telefonica to consider options for the UK business, which is worth £10.3 billion (€13.5 billion).

Meanwhile, the Spanish firm is also pursuing other transactions to reduce its €50 billion debt pile, notably an IPO for Telxius, its global infrastructure business, which could raise between €4 billion and €5 billion.